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Franchisees turn on Crispin's King

Burger King sales are slipping, and franchisees are blaming the king-and, well, the entire marketing strategy.

The always-uneasy truce between the fast-feeder and its National Franchisee Organization has collapsed as the two sides scrap over pricing and promotional plans, including the chain's $340 million advertising campaign. While Crispin Porter & Bogusky's much-vaunted creative has indisputably raised the profile of the Miami marketer, the advertising featuring Burger King's creepy king and a fictional heavy-metal band Coq Roq has proved polarizing to some franchisees, who argue it skews too heavily to a male teens.

While that demographic represents most of Burger King's profit, the concern is that by targeting so narrowly the chain risks alienating other audiences, including the women who are increasingly embracing McDonald's.

Burger King is "highly effective with a very narrow target so the strategy is working, but is it the right strategy?" said one fast-food industry executive. "From a traffic perspective ... the answer is no. They're selling higher-priced products to fewer people, and that's where McDonald's understands that it's a volume-driven business."

The disquieted faction initially held their tongues, ("I'm not the target," said one), because Burger King was registering strong same-store sales gains. The chain posted a 6.8% same-store sales rise for the fiscal year ended in June, the best performance in a decade.

But then the tear ended. After 15 straight months of gains, sales slipped in June and July, and the company stopped reporting monthly sales. For the first fiscal quarter ended in September, Burger King reported only a 1.1% same-store sales gain, and several franchisees predict the next quarter will turn negative.

Tensions over the marketing strategy erupted into all-out war as the two sides battled over initiatives such as its recent Chicken Fries and a "King Kong" tie-in.

Cutting ties

That led Burger King, according to Dow Jones News Service, to cut ties with the NFA leadership last month in frustration due to NFA's "knee-jerk opposition" to propositions to extend restaurant hours, promote a value menu and launch gift cards. On Sept. 30, it reneged on a three-year agreement to pay $1 million annually to the NFA, which represents about 90% of the chain's U.S. franchisees who own and operate about 7,000 units. Burger King will instead divert those funds to its annual advertising coffers.

That prompted Dan Fitzpatrick, chairman of the NFA, to blast back on Oct. 12 with a 12-page response to the chain essentially calling Burger King a despot. In the response, Mr. Fitzpatrick reportedly said that the fast-feeder's management "will not tolerate well-intended constructive criticism or input that differs from [its] view." Mr. Fitzpatrick declined to comment and Frank Capaldo, executive director of the NFA, couldn't be reached.

Despite the now public rift, Burger King CEO Greg Brenneman maintained through an internal voicemail Oct. 21 that the company is not "anti-NFA," but that "We do have issues with the current NFA leadership and how business is conducted. Let me assure you that we, BKC and the franchisees, are all committed to moving the brand forward in a positive manner."

And some franchisees are on board. Linda Fox, a franchisee in Lenexa, Kan., supports Burger King even when she disagrees with them. "I don't expect anybody to hit home runs every day," she said. "Have I liked every single thing [Burger King] has come out with? Probably not, but [Russ Klein, Burger King's chief marketing officer] is very, very talented and we would be foolish not to tap that talent," she said. "If we had a larger marketing budget, I would most definitely ask for more advertising to be a little broader."

"In any group of hundreds of business owners in a franchise system some will be happy and others won't be," said a Burger King spokeswoman. "In terms of advertising, the only measure of success is sales. Just this week we announced our sixth consecutive quarter of positive comparable-store sales."

Some franchisees, however, point out this number is hardly huge-one actually laughed when queried about the 1.1% figure-and instead attribute the rise to premium pricing and local discounting rather than strong traffic in the stores.